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Nasdaq ends at record high on stimulus bets, Apple boost

(Reuters) - Wall Street showed signs of a Santa rally on Tuesday, with the Nasdaq closing at a record high, helped by optimism about a potential government stimulus to protect the economy from the coronavirus pandemic.

Apple Inc was the top boost to all three U.S. benchmarks, surging 5% to its highest since September after a report said it plans to increase iPhone production by 30% in the first half of 2021.

The Russell 2000 index of smaller companies surged about 2.4% to a record high. It was the strongest day since Nov. 24 for the S&P 500 and the Dow Jones Industrial Average.

Some investors viewed the recent spike in coronavirus infections and deaths, along with a grim November employment report, as an impetus for a quick deal on a COVID-19 stimulus bill, with economically sensitive sectors such as consumer discretionary, materials leading gains.

The S&P 500 utilities index rose almost 2% and logged its strongest one-day gain since early November.

“They have lagged, and you could see a little bit of rotation of people looking for yield,” said 6 Meridian Chief Investment Officer Andrew Mies, referring to utilities stocks.

Broad gains across the stock market were a healthy sign, Mies added.

FILE PHOTO: The U.S. flag is seen on a building on Wall St. in the financial district in New York, U.S., November 24, 2020. REUTERS/Brendan McDermid

U.S. House Speaker Nancy Pelosi invited top congressional leaders to meet later on Tuesday in an effort to finalize a massive government spending deal and reach an agreement on a new package of coronavirus relief.

The Fed is also expected to signal low-interest rates for the foreseeable future in its two-day meeting starting Tuesday. The recent coronavirus vaccine roll-out is expected to improve the central bank’s 2021 outlook.

Unofficially, the Dow Jones Industrial Average rose 1.13% to end at 30,199.31 points, while the S&P 500 gained 1.29% to 3,694.62.

The Nasdaq Composite climbed 1.25% to end at 12,595.06, exceeding its previous record high close on Dec. 8.

Supported by Apple, the S&P 500 technology sector index rallied 1.6%. The sector has outperformed the broader market during the pandemic and is up over 35% year to date, with investors viewing it as resilient to virus-related disruptions.

“The market likes to go to tech when it is afraid the economy may stall because of a rise in infections and shutdowns,” said Christopher Grisanti, chief equity strategist at MAI Capital Management.

Increased liquidity and ultra-low lending rates have sent investors flocking to stocks for during the COVID-19 pandemic, while recent optimism over a vaccine pushed the S&P 500 to a series of record highs last week.

“We have prices up and earnings down and we still have a risk to the economy out there, so that’s where the potential challenge is,” warned Mike O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut. “Investors have to be more tactical, look at more of that value space that probably offers more opportunity as the recovery unfolds.”

Eli Lilly and Co jumped 6% after the company said it would buy Prevail Therapeutics Inc in a deal potentially valued at $1 billion to expand its presence in the lucrative field of gene therapy. Prevail’s shares surged 82%.

Moderna Inc’s shares tumbled 5%, even after U.S. Food and Drug Administration staff members did not raise any new concerns over data on the drugmaker’s COVID-19 vaccine. A report said the vaccine will gain emergency use approval on Friday.

Advancing issues outnumbered declining ones on the NYSE by a 3.24-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored advancers.

The S&P 500 posted 18 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 181 new highs and 19 new lows.

Volume on U.S. exchanges was 10 billion shares, compared with the 11.5 billion average for the full session over the last 20 trading days.

Additional reporting by Ambar Warrick, Shreyashi Sanyal and Lisa Pauline Mattackal in Bengaluru; Editing by Aurora Ellis

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